China’s piecemeal stimulus paying off slowly, but property still bleak and private sector ‘lacks that animal spirit’

China’s economy showed signs of vigour in August, with both retail sales and manufacturing picking up, but ‘road to recovery a bumpy one’

Some analysts are still awaiting a strong policy signal, or a ‘bold reform plan’, from Beijing to restore confidence in the private sector

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Investment in China’s property sector continued to deteriorate in August, official data showed on Friday. Photo: Reuters

Published: 10:02am, 15 Sep 2023Updated: 9:17am, 18 Sep 2023

China’s economic recovery gathered pace in August as policymakers’ stimulus measures elevated consumption and manufacturing activity, but economists responded to Friday’s data release with calls for bolder moves to pull the real estate and private sectors out of the doldrums.

Retail sales rose by 4.6 per cent last month, year on year – higher than the 2.5 per cent seen in July – while the total value of industrial production climbed by 4.5 per cent in August, accelerating from a rise of 3.7 per cent in July, the National Bureau of Statistics (NBS) said on Friday.

Despite the upbeat performance in manufacturing and consumption, the contraction of China’s property sector deepened in August.

Investment in the property sector, which has been plagued by debt stress and weak confidence among homebuyers, continued to deteriorate, falling by 8.8 per cent in the first eight months of the year, compared with 8.5 per cent over the first seven months.

“Overall, today’s data suggests that China’s economy has started to improve from a depressed level,” said Larry Hu, chief China economist at Macquarie Capital. “But given the lack of animal spirit in the private sector, policy remains the only game in town.

“The strategy of piecemeal stimulus might eventually add up, but it also makes the road to recovery a bumpy one.”

Beijing has stepped up support measures since July amid rising concerns that China’s economic recovery had lost momentum and fears that the crises surrounding real estate and local-government debts could bring a hard landing for the overall economy.